NU Online News Service,Jan. 17, 11:48 a.m. EST

Revisions in catastrophe models most likelywon't offset the lack of demand in the reinsurance market, Moody'sInvestor Service said today.

In a brief outlook, Moody's said reinsurancedemand remains stifled because primary insurers have tighterreinsurance budgets and lower volumes due to reduced economicactivity. This is not expected to change due to the modelrevisions, "despite the expectation of increased modeled losses incertain peril zones," Moody's said.

Insurance executives have openly wondered aboutthe latest version of Risk Management Solution's (RMS) U.S.hurricane model and the potential effects it could have on rates. The model is said tomake adjustments to the impact of wind during a hurricane—possiblyputting more risk inland as the modeler looks at the interaction ofwind and the surface of the sea.

Still, Moody's said, "Absenta transformational catastrophic event, we expect pricing tocontinue to deteriorate during 2011 and believe that the eventual'turn' in the reinsurance pricing cycle may still be two or threeyears away."

Excess capacity was boosted by increasedcapital from reinsurers' retained earnings and unrealized gains onfixed-income securities, Moody's said.

The weakness in global reinsurance pricing nowreported by Aon Benfield, Guy Carpenter, Willis Re and TowersWatson is "credit negative" for reinsurers, since it puts addedpressures on underwriting margins and profitability in 2011,Moody's said.

Property reinsurance rates in the U.S. are reported to havedeclined 5-10 percent at Jan. 1 renewals.

Casualty rates were flat to down 10 percent,with terms and conditions holding, except for weakening in certainliability lines, Moody's said.

"This is something we will continue to monitorclosely in light of substantial losses that resulted from ameaningful weakening of terms during the last market downturn inthe late 1990s," Moody's added.